The EC’s “Fit for 55” proposals include the raising of the EU’s 2030 target for total energy produced from renewable sources to 40%. Much of the rest of the world will likely raise its targets at some point too. Continuing to cut the cost of renewable energy generation will be essential to make that happen, and take pressure off all the other associated costs of supporting its integration into the energy system. Michael Taylor at IRENA summarises their report that shows the dramatic cost reductions experienced in the last decade are still happening. In 2020, the global weighted-average levelised cost of electricity (LCOE) for new capacity additions of onshore wind declined by 13%, of offshore wind by 9%, of utility-scale solar PV by 7%, and of concentrating solar power by 16%. The main drivers include innovation in manufacturing, equipment performance, new business models, and economies of scale. Special credit is given to the very high learning rates – learning by doing – of solar and wind which should be a model for new technologies (think hydrogen, carbon removal, etc.) needed at scale for the energy transition. Financing costs are also dropping; though cloaked in confidentiality, IRENA is developing a database of projects to uncover the details of this welcome trend. Taylor points at examples from Germany, Bulgaria, the U.S. and India to illustrate how new wind and solar installations are even undercutting coal.
The year 2020 was marked by the global pandemic and the subsequent economic and human toll it took as the COVID-19 virus spread. One bright spot, however, was the resilience of renewable power generation supply chains and record growth in new deployment. A record 261 GW of new renewable power generation capacity was added in 2020 and between 2000 and 2020, renewable power generation capacity worldwide increased 3.7‑fold, from 754 gigawatts (GW) to 2,799 GW.
IRENA’s “Renewable Power Generation Costs in 2020” report also shows there was no disruption to the trend in continued cost declines for solar and wind power, either. With project-level cost and performance data from around 20,000 projects (covering 1,982 GW) renewable power generation projects and 13,000 Auction/PPA results (covering 582 GW), the report provides a rich view of cost trends.
Continued LCOE declines
In 2020, the global weighted-average levelised cost of electricity (LCOE) from new capacity additions of onshore wind declined by 13%, compared to 2019. Over the same period, the LCOE of offshore wind fell by 9% and that of utility-scale solar photovoltaics (PV) by 7% (Figure 1). The LCOE of concentrating solar power (CSP) plants fell by an annualised rate of 16%, when smoothed over the period 2018-20, given the volatility in recent years makes the annual change highly volatile.
Cost reduction drivers
Cost reductions have been driven by innovation in manufacturing, equipment performance and business models; as well as by economies of scale and more competitive access to financing. The virtuous cycle of increasing deployment lowers costs, encouraging more countries to take the economic opportunity renewable power now represents and continues apace.

Figure 1: Global weighted-average LCOE from newly commissioned, utility-scale solar and wind power technologies, 2019-2020
A decade of remarkable cost reduction
The decade 2010 to 2020 represents a remarkable period of cost reduction for solar and wind power technologies. The combination of targeted policy support and industry drive has seen renewable electricity from solar and wind power go from an expensive niche, to head-to-head competition with fossil fuels for new capacity.
Utility-scale solar PV
Utility-scale solar PV has led the way, with the global weighted‑average LCOE of utility‑scale solar PV for newly commissioned projects falling by 85% between 2010 and 2020, from USD 0.381/kWh to USD 0.057/kWh (Figure 2), as total installed costs fell from USD 4,731/kW to USD 883/kW.
The LCOE of residential PV systems also declined steeply – by between 49% and 82% – over the same period in Australia, Germany, Italy, Japan and the United States.
Onshore wind
For onshore wind projects, the global weighted‑average cost of electricity between 2010 and 2020 fell by 56%, from USD 0.089/kWh to USD 0.039/kWh.
Compared to solar PV, where electricity cost declines are mainly driven by falling total installed costs, onshore wind cost reductions were driven more evenly by both falls in turbine prices and balance of plant costs, and higher capacity factors from today’s state-of-the-art turbines.
Offshore wind
For offshore wind, the global weighted‑average LCOE of newly commissioned projects declined from USD 0.162/kWh in 2010 to USD 0.084/kWh in 2020, a reduction of 48% in 10 years. This has transformed the outlook for offshore wind, with cumulative installed capacity of offshore wind at just 34 GW at the end of 2020, which is around one‑twentieth of that of onshore wind. IRENA has recently released a detailed report that looks at how innovation in offshore wind has translated into performance improvements and cost reductions and a framework for evaluating innovation outputs.
Concentrating solar power (CSP)
Over the period 2010 to 2020, the global weighted‑average cost of electricity from CSP fell 68% from USD 0.340/kWh to USD 0.108/kWh. With just two projects commissioned in 2020 – both in China – 2020 was a disappointing year for deployment.
Having said that, the 68% decline in the cost of electricity from CSP – into the middle of the range of the cost of new capacity from fossil fuels – remains an impressive achievement given just 6.5 GW of CSP capacity at the end of 2020, slightly less than a hundredth of the capacity of solar PV installed. Technology improvements, higher operating temperatures and low-cost thermal energy storage make CSP an increasingly attractive source of dispatchable renewable power.

Figure 2: Global LCOEs from newly commissioned, utility-scale renewable power generation technologies, 2010-2020
New renewables: getting cheaper than the cheapest fossil fuels
With these cost reductions, 2020 saw a total of 162 GW of the renewable power generation capacity added that had electricity costs lower than the cheapest source of new fossil fuel‑fired capacity. This was around 62% of total net capacity additions that year.
In emerging economies, where electricity demand is growing and new capacity is needed, these renewable power generation projects will reduce costs in the electricity sector by at least USD 6 billion per year, relative to the cost of adding the same amount of fossil fuel‑fired generation.
…not just Hydro
Globally, since 2010, a cumulative total of 644 GW of renewable power generation capacity has been added with estimated costs that have been lower than the cheapest fossil fuel-fired option in their respective year. Prior to 2016, almost all of this was being contributed by hydropower, but since then it has increasingly included onshore wind and solar PV. Of the total, over the decade, 534 GW was added in emerging economies and could reduce electricity system costs in these by up to USD 32 billion in 2021 (USD 920 billion, undiscounted, over their economic lifetimes).
Existing coal-fired power plants increasingly stranded
As costs for solar PV and onshore wind have fallen, new renewable capacity is not only increasingly cheaper than new fossil fuel‑fired capacity, but increasingly undercuts the operating costs alone of existing coal‑fired power plants.
Indeed, in Europe in 2021, coal-fired power plant operating costs are well above the costs of new solar PV and onshore wind (including the cost of CO2 prices). Analysis for Germany and Bulgaria shows all the coal-fired plants studied have higher operating costs today than new solar PV and onshore wind (Figure 3). In the United States and India, operating costs for coal plants are lower, however, due largely – but not completely – to the absence of a meaningful price for CO2. Nonetheless, the majority of existing Indian and U.S. coal plants have higher costs than solar PV and onshore wind, due to the very competitive costs for those renewable technologies in those two countries.
In the United States, in 2021, its estimated that between 77% and 91% of the existing coal‑fired capacity may have operating costs that are estimated to be higher than the cost of new solar or wind power capacity, while in India, the figure is between 87% and 91%. Adjusted to a levelised cost basis, the weighted average price from auction and power purchase agreements for solar PV in India for 2021 is USD 0.033/kWh, while for onshore wind it is USD 0.032/kWh. In the United States, the respective figures are USD 0.031/kWh and USD 0.037/kWh.

Figure 3: Operating costs only of existing coal-fired power plants in Bulgaria, Germany, India and the United States by installed capacity and capacity factor in 2020
Profound implications: the very high learning rates of solar and wind power
The cost declines experienced from 2010 to 2020 represent a remarkable rate of descent. This not only has enormous implications for the competitiveness of renewable power generation technologies over the medium-term. It also has implications for other technologies that have similar characteristics and are needed in the energy transition.
Over the period 2010 to 2020 utility‑scale solar PV had the highest estimated learning rate (the percentage reduction in costs for every cumulative doubling of installed capacity) for the global weighted‑average total installed cost, at 34% (a period where 94% of cumulative installed PV capacity additions occurred). This technology also had the highest LCOE learning rate, at 39%.
For onshore wind, the LCOE learning rate for the period 2010 to 2019 was 32% – slightly less than twice that for total installed costs (Table 2).
For CSP, onshore and offshore wind, performance improvements that have increased capacity factors have played a larger role in falling electricity costs. As a result, the LCOE learning rates for CSP, onshore and offshore wind are significantly higher than those for their total installed costs.
Falling financing costs are also contributing to lower electricity costs
It’s not just economies of scale, learning by doing, more competitive supply chains, technology improvements, more experienced developers and competitive procurement that have driven down the cost of renewable power; but the cost of capital as well. This has been somewhat obscured by the fact that data on project-level cost of finance is highly confidential and difficult to obtain in sufficient quantity to provide more than anecdotal evidence.
However, the data in the IRENA Renewable Cost and Auction and PPA Databases can be used to reverse engineer the implied weighted average cost of capital (WACC). Matching projects in both databases allows us to set the LCOE value to the adjusted Auction/PPA price and then vary the WACC – keeping the project-level total installed costs, capacity factor and O&M costs constant – until the LCOE formula matches the adjusted Auction/PPA price.
The results for utility-scale solar PV projects in India can be seen in Figure 4. The data shows the financing conditions that projects commissioned in a given year experienced, which will be based on the financing conditions at the point of the final investment decision, typically 1-2 years prior to the date of commissioning.

Figure 4: Derived weighted average cost of capital for utility-scale solar PV by year of commissioning in India, 2016-2020
To fill in the gaps in our knowledge of the WACC of renewable energy projects by technology and country, IRENA is undertaking a survey of stakeholders to collect as much data as possible. This will help calibrate a cost of capital benchmark too that will allow next year’s report to have country and technology specific WACC assumptions for solar and wind power for the first time (contact finance.survey@irena.org if you would like to participate and ensure policy makers have a true understanding of financing costs).
***
Michael Taylor is a Senior Analyst at IRENA
Given that concentrating solar power was included in this survey of costs, it would have been interesting to also have seen if similar cost falls are occurring for geothermal power. Given geothermal’s potential to benefit from learning, especially from the oil and gas industry, I wondered if it too is experiencing similar falls?
Both CSP and geothermal offer a power supply with the promise of less intermittency, which has implications for the success of the renewable sector as a whole: less intermittency = less need for storage and therefore lower LCOE.
Reading “The Best of Times The Worst of Times” by Paul Behrens where he takes a look at the climate challenges we face with both his optimistic and pessimistic hat on. The unexpected drop in solar power production over the last 10 years or so is one of his main planks of optimism. Reading your figures here I can see why.